Refining PEC Processes: Part 2

A few days ago, I began a four-part series of entries concerning recent developments at Pedernales Electric Cooperative. In my first piece, I covered a recent change to our Director election policy that will be instituted in the 2015 elections. Click HERE to read more about it.

Now my focus will turn to another Director-related topic, which is the Co-op’s policy regarding Director education. As it stands now in the PEC bylaws, each Director is required to attend an initial series of “beginner” courses within his or her first year, to be followed up by further education as necessary to perform a Director’s fiduciary duties. The current policy reads as such:

Article III. Section 2.m “[A Director must] be willing to devote such time and effort to his or her duties as a Director as may be necessary to oversee the Cooperative’s business and affairs including…obtain[ing] the Credentialed Cooperative Director (CCD) designation from NRECA within the first year after election to the Board; [and] attend[ing] state and national association meetings and Director continuing education training as needed to maintain current knowledge and improve awareness of potential risks to the Cooperative.” (Click HERE to read a copy of our current bylaws.)

At our September committee meeting, a bylaw amendment was proposed to change the education requirements for Directors. This amendment would change the time period in which a Director had to complete the initial training from one to two years after being elected. It also would have REQUIRED Directors to “complete two courses, conferences, seminars, or training opportunities each year beginning with the first anniversary after their election to the Board of Directors.” (Click HERE to see the proposed amendment in it’s full form, p. 118)

Almost all of the Directors had some problem with this amendment. One Director didn’t like the idea of extending the time allotted to receive the initial training. She believes that training is crucial in order for a board member to be effective. I had a problem with the resolution from a different angle – and several of my other colleagues on the Board agreed. I’ll go over my objections in a minute, but the major takeaway here is that the end result of our discussions was that we indefinitely tabled the amendment. The bylaws will not be changed to make room for these new Director education requirements.

While this issue ends up being something of a moot point since it didn’t gain traction, I think it’s important to note why several board members and I objected to this resolution. The first question we must ask ourselves is when is it appropriate for the Board of Directors to alter the bylaws in the first place? I remember a gentleman spoke at our annual meeting about this very question. He noted that PEC’s bylaws – the member-owners’ protecting documents – could be changed at anytime and for any reason by the Board. That particular statement troubled me, especially when he further went on to give the example that somewhere along the lines, the bylaws had been altered to change the Co-op’s mission from delivering “lowest cost” power to “competitive[ly] price[d]” power.  Maybe that’s just semantics, but it could amount to much more. After all, “competitive” is quite loose. Competitive with whom?! Lowest cost, on the other hand, is pretty concrete. I would have preferred to keep the language the way it had originally been written.

One could argue – and it’s a fair argument – that Directors must be able to change the by-laws without approval from a majority of members because our Co-op is so large, and we get such low voter turnout.   We might never be able to change anything because we would never get enough participation. There are some who would say that is a GOOD thing – they don’t want the bylaws to be changed! Others would say the policy we have of allowing time for member-review of proposed bylaw changes before the Directors take a vote is plenty thorough to insure members have a chance to voice objections or concerns before the proposed revisions are adopted. I see value in both sides of the argument, but I do believe at the very least there should be some inclination from the membership that changes are desired before we even bring the issue of a bylaw change forward for discussion. Changes should not be made solely at the whims of the Board.

I personally had never heard anything from a member suggesting a desire for Directors to be required to get a minimum of two continuing education courses per year. If anything I had heard several people express concern regarding the costs associated with Director education, namely travel, lodging, and convention fees and expenses. The issue of cost brings me to my second objection to this resolution – what actually is the value of “continuing education” for Directors? I honestly do not know. I haven’t been around long enough, and I haven’t even attended the beginning NRECA Director courses required of first-year PEC board members. I’m set to do that in December, as that is the only time I can get all five courses done without other conflicts arising before my first year on the board expires. (Unfortunately, I will even have to miss the December board meeting in order to get this education – I doubt that this was the intent of the bylaws, and yet we see what can happen when the bylaws are freely changeable. Unforeseen circumstances are bound to arise.)

The bottom line is we must take into account the costs associated with sending board members on Co-op related trips to get education. What do we, the PEC members, get out of our Directors attending? Perhaps they learn a lot of valuable information. Perhaps not. I guess I’ll find out in December. Beyond the initial training, though, I think there is room for us to explore if there is a better way for us to educate our Directors than sending them off to expensive conferences – maybe we could team up with fellow Central Texas Co-ops and bring educators here so that we can cost share and all benefit together. You know, the whole co-ops-helping-co-ops principle. I would love for us as a board to investigate something like that.

I know I still have a lot to learn about PEC and the co-op world in general. I’m asking questions. I’m seeking out answers. I’ve become a student of the energy sector, and I’m enjoying the material tremendously. Since my election in June, and for months leading up to it, I have spent hundreds of hours educating myself on the electric industry and PEC specific matters. I see great value in that type of education, and I know it has made a difference in my performance on the board. As long as I have the privilege of serving you in my capacity as a Board Director for Pedernales Electric, whether or not I’m able to travel to seminars and conferences, I will be committed to educating myself on matters that affect my decision-making abilities.

“Refining PEC Processes:  Part 3 will be out early next week.”

Refining PEC Processes: Part 1

This entry begins a four part series concerning recent PEC Board activity and discussions. We have a lot happening in our co-op these days. The last few meetings have brought about a number of items that deserve member attention, and I wanted to take the time to bring each of those things into context for you.

Part one of this series will deal with a potentially significant change to our PEC director election process. Part two concerns director education. Part three addresses rates. Part four will focus on our community involvement. With all of the pivotal things happening in the news today – ISIS; Scotland’s failed bid for Independence; the 2014 elections – I wouldn’t expect all of you to be keeping close tabs on the PEC board meetings. However, the topics included in this series of entries to varying degrees affect the health of our co-op, and I wanted you to be made aware of them. (To see the fully recorded board meetings, click here.)

PART ONE:  PEC Board narrowly passes potentially significant modification to Director Election process

PEC has benefitted from a much-improved election process since the Fuelberg era, and yet members and candidates in recent years have presented several shortcomings with the current system. The first shortcoming, of course, deals with the size of the co-op. With over 250,000 eligible member-owners from 24 counties, director-candidates face the enormous task of connecting with a gigantic numerical and geographical body. Having just been through this process myself, I can assure you that the obstacle presented to potential candidates by the sheer size of the PEC membership should not be minimized. Imagine a candidate wants to send a postcard to members reminding them to vote. Conservatively, at $0.10 per mail piece, the cost for one mailing would be $25,000! And that doesn’t even take into consideration postage.   The question has naturally become how PEC can make the election process more manageable for candidates – we want good, qualified people to step forward if they feel the call of service and have talents that would benefit the co-op. They are more likely to do that if they feel they can mount a worthwhile campaign.

We, as a membership, attempted to address this very issue from one angle in the 2014 election through a referendum to change voting from at-large elections to single-member district elections.  (These two links will provide some background on this issue:  Blanco News and PEC 2014 election referendum release.) That referendum, however, did not pass, and members will continue to be called on to vote in each yearly election for every director on the ballot.

Another way to address the manageability issue of director campaigns is to develop a way for candidates to communicate specifically with the 8% or less of the membership that actually participates in the election process. It’s remarkable that with several weeks of online voting and mail-in voting; day-of in person voting; and several communications from the co-op leading up to the election; PEC still sees such a small voter turn out.   In conversations surrounding this problem, an idea recently surfaced to release a list to approved candidates (candidates that have been approved by the qualifications committee) of the members’ names and addresses who voted in the most recent election. It is important to note that the entire membership list is already attainable by anyone seeking to be listed on the ballot so that he or she may verify signatures on the member petitions required to become a candidate. As is the case in the current at-large membership list, co-op members would be able to opt-out of having their names and addresses listed on the recent voter list. Additionally, no information about whom a person voted for would be included on the list.

The way I see it, having this “recent voter list” available for approved candidates can only improve the election process. We give the interested members an opportunity to hear from their potential representatives so they might make more informed decisions, and we spare candidates from having to invest exorbitant amounts of money in order to communicate with them by narrowing the target audience. Someone asked me about a potential invasion of member privacy for those that don’t wish to be contacted, to which I pointed out three main things. 1) We are only releasing addresses, which we already do for the entire membership. This may mean you will receive some extra mail from candidates in May and June every year, but honestly, how many pieces of mail do you receive that you throw away every month anyways? If you don’t care about PEC elections, just chunk it!! 2) The chances that you will receive the mail pieces if you don’t participate in the PEC election process will be quite small since you won’t be on the recent voter list unless you voted in the 2014 elections. 3) I heard from several members following the election that they wish they had more contact from candidates so they could get a better sense of whom to support. If you do care about the director elections and want more information about the people that may represent you on the PEC board, you may now have better access to that information.

We first discussed this potential change at our August committee meeting, and we voted on it at our September regular board meeting. District 5 Director James Oakley, with my support, proposed a resolution to make a recent voter list available to qualified candidates. I seconded the resolution, and it passed with “yes” votes from Director Oakley, Director Perry, Director Scanlon, and myself. The “no” votes came from Director Clement, Director Landaker, and Dr. Cox (who later voted “yes” to the amended Election Policies and Procedures that included this new resolution).

This change will be enacted in the 2015 election cycle, and I believe it will greatly enhance the system we already have in place. It’s the first of many small steps in the right direction that I hope to see as a board member at our co-op.

UPDATE:

***This resolution will be rescinded at our next Board Meeting on October 20th.  A coordinated effort between the dissenting Directors and members concerned with privacy protections at our October 13th Committee meeting caused a shift in Board support for the Recent Voter Participation list.  We will have to go back to the drawing board to try and improve our election process, and I encourage all members to offer opinions on how we can best do that.***

“Refining PEC Processes:  Part 2” is due out later this week.

Knowing When To Abstain

     It’s been exactly 60 days since the PEC 2014 Annual Meeting. I have yet to hit the official two-month mark as a Board Director, and despite that relatively short length of time, I feel certain I have learned more than I ever thought possible. I have learned plenty about the electric industry in general. I have learned quite a bit about the world of electric cooperatives and the players within that world, both big and small. I have even learned a lot about and from my fellow directors and the PEC management. The amount of things to know is vast, and the learning curve is steep. As many have aptly put it to me who have been in a similar position in the past, it’s a lot like drinking water from a fire hose. And the hose has been on non-stop since June 21st.

     Despite the deluge of information and advice, I have enjoyed tremendously my new position and feel blessed to be able to serve the PEC membership in this way. My hope is that now, after my first two official board meetings, I can pause for a minute and reflect on my experiences sitting at the dais. Many of you have asked that I keep you apprised of important goings-on at the co-op, and at this juncture, I have a few pertinent things to report.

     To begin, the co-op is engaging in a multitude of improvement projects in areas such as communications, power supply, infrastructure, and technology. CEO John Hewa, to his credit, has taken on a host of PEC’s shortcomings and rallied his management team around a general initiative to clean up our co-op in a focused and timely manner. It has been a pleasure to witness his work ethic and dedication to bettering the overall PEC experience for the membership, and I am eager to see some of the projected outcomes. I think many of you will be very pleased. I don’t want to take too much time talking about specifics today because I’d like to report mostly on the August board meeting, but I encourage any interested members to visit the new and improved PEC website (http://www.pec.coop) and view some of the changes going on at the co-op yourselves. I do want to impress upon my fellow members that Mr. Hewa and his team are collectively working very hard to make PEC a high functioning and low-cost operation. I will continue to support their efforts – and ask lots of questions along the way!

     The theme of “questions” is really the topic for today. Yesterday, at our August board meeting, many questions surfaced surrounding a proposed plan to conduct an Integrated Resource Plan (IRP) in conjunction with PEC’s potential plans to embark on solar plant construction. If you are like me and do not come from a background in the electric industry, let me quickly explain, as I see it, what an IRP is. An IRP, in laymen’s terms, is “a planning process that, if correctly implemented, locates the lowest practical costs at which a utility can deliver reliable energy services to its customers.”*  An IRP is a thorough investigation, usually undertaken with the help of consultants, to determine a) if a utility needs to generate more power to meet its resource needs, b) why it needs to generate more power, and c) how it will generate more power. Taken in that scope, and IRP sounds like a pretty darn good thing if you are a person – like myself – that wants to make sure that one’s electric provider is giving her the best deal possible, while simultaneously planning for the future. The PEC Board passed as policy in 2010 that the co-op must initiate an IRP before proceeding with any generation plans, and thus again this proposal seems to be a prudent one.

     When you dig a little deeper, however, you find out some things that muddy the waters when it comes to PEC and an IRP. First, IRPs are typically implemented by generating entities, or utilities that PRODUCE their own electricity. Throughout its 75-year existence, PEC has always been a DISTRIBUTION entity (i.e. we purchase our energy from elsewhere, mainly the LCRA, and deliver it to our members). It seems a little odd that we would embark on a plan to figure out what source of generation to potentially build when we have never actually built a generation plant before. Second, the IRP is being conducted in conjunction with the desire of some of the current board and previous boards to adopt a goal of hitting a 30% renewable capacity by 2020. What that means is that in six years time PEC must ensure that 30% of its energy capacity at peak hours be provided by renewable energy. This goal was set in place in 2008 and reaffirmed in 2012. In the last few months, PEC management has presented the board with a proposal to achieve that 30% goal by adopting a new solar program that could largely include the building of a PEC-owned solar plant. It is here that we see the idea of PEC generation coming into play. So it begs the question: are we initiating an IRP because we absolutely need to get into the generation business and will look at the most cost-effective and beneficial way to do that while considering all potential energy sources? Or are we embarking on the IRP because we intend to pursue solar, and board policy insists that we do an IRP before locking in a plan? Third, IRPs are not cheap, and they typically take a long time to execute. Being thorough in something as vast, detailed, and rapidly changing as the electric industry can be timely and costly. The projected IRP cost as presented to the Board was as high as $100,000. While a typical IRP takes a minimum of six months to complete, management projects PEC’s current IRP will wrap up by December 2014. There are other potential concerns than the ones listed here, but I believe these three are sufficient to demonstrate that I had concerns about moving forward with this IRP.

     As it turns out, I was not the only Director to have questions. Last Monday, at our meeting of the committees, several directors seemed to be against an IRP. (for recordings of our meetings, visit PEC Board Meetings and Notices) Many said outright they would not vote for one because they thought it would be redundant and potentially throw us off our timeline for our renewable goals. Some said the policy itself was outdated and should be scrapped. Some said it would cause us to incur unnecessary costs. One director, however, pointed out several reasons why PEC must conduct an IRP before moving into any sort of generation for several reasons, not least of which being the policy that most of the directors had voted into place a few years ago. As the newest director, I sat back and listened attentively to the dialogue, and I came away from the meeting with several thoughts. We had a policy in place that we should either uphold or amend, but I didn’t think it proper to circumvent it. We also had a potential expense that may not be necessary, but if we plan on moving forward with generation, I, for one, want to be sure we get all of the facts and figures and see which generation source would be the best. After thinking about it all week and talking with the CEO, I actually arrived at Monday’s board meeting thinking I would vote for the IRP and probably do so as a minority opinion on that vote.

     What actually happened on Monday was quite different. When the time came to vote on the IRP, one of the directors who had previously stated he would not support the IRP actually proposed a resolution to move forward with one with one caveat: this particular IRP would be operated in a shorter time frame. Most of the others on the board that had also been against an IRP now supported it. I was dumbfounded – what had changed?!   To make matters more complicated, the one director who had supported an IRP the week before now said he did not support the newly proposed one because of the reduced timeframe, as well as some other new concerns. I tried to use the discussion time to listen to the back-and-forth between directors and management so I could decipher whether or not to vote for this narrower IRP, but when time came to cast a vote, I still felt conflicted. On the one hand, I wanted to support staff and give them the proper resources to do their jobs. I also wanted to make sure we set out getting all the information necessary to make an informed decision about our renewable generation plans. What I did not want was to vote for something that was not only unnecessary, but also potentially contradictory to our mission of low cost power delivery. And then there were the questions surrounding my colleagues’ about-face on the matter.

So what did I end up doing? How did I cast my vote?

I abstained.

And everyone else voted yes.

     Maybe that leaves me the odd woman out, but I am okay with that for now. Sometimes its better to say don’t have enough answers to vote either way than to succumb to pressures you don’t fully understand, or go along with the crowd for the sake of appearances. I am more than happy to support the decision of the board, and I’m glad I can give Mr. Hewa and his staff what they need to get important information regarding PEC’s future energy plans. I’m also glad, though, that I trusted my instincts and didn’t vote for (or against) something that didn’t seem clear to me.

     At the end of the day, I will always circle back to my primary responsibilities as a board member: to ensure we provide safe, reliable, and low cost power to our members; and to exercise the highest level of fiduciary care when making decisions that cause us to spend your money. When it came time to vote, I heard some things that kept me from voting an outright “no,” but I had not satisfied enough of my questions to feel good about voting “yes.” I didn’t know enough about why we had reached this juncture of deciding on an IRP. I still had questions about costs. I still had questions about necessity.  I had questions about why the board changed positions so quickly and so dramatically. And I still have questions about whether or not it is appropriate for us to have a mandatory goal in place for renewables. My feeling is that if solar, wind, or any other type of renewable is the most cost-effective option, and we have the ability to incorporate it into our power supply, we should move forward with doing so for those reasons rather than to satisfy a political agenda.  

     I’ve added a lot of items to my list of things I’ve learned during the past two months. I know a lot more about electricity and co-ops. I know a lot more about PEC and the communities we serve. I know that the votes we cast in the boardroom affect the lives of hundreds of thousands of people – what we do in there is important. And knowing when to abstain is a lesson I’ll take with me for years to come.

*(“Best Practices in Integrated Resource Planning,” p.4 see more at Regulatory Assistance Project Library).

From the Campaign Trail to the Board Room

“Director Pataki.”

That will take some getting used to.  To begin with, I am not a terribly formal person – I even have a hard time with my children’s babysitters calling me “Mrs. Pataki” – and while I appreciate that a certain level of respect is due a position such as Board Director, I am still having a hard time wrapping my head around my new title.  After all, I spent several months introducing myself to members across the PEC territory in a substantially less formal capacity.  I enjoyed connecting with them on a personal level and hearing their candid concerns and praises for the co-op, and my hope is that I can continue to get that grass roots level interaction and engagement.  The most important thing to me as a Board Director is that I can stay connected to you, the membership, and what you want for PEC.  Please, call on me anytime – send me your concerns and questions, and I’ll see what I can do to get you answers and work to enact positive change for the co-op.  My position may have changed, but my desire to work for you has not.

So yes, I’ve officially “gone to the dark side,” as one of my supporters said the other day.  In many ways, that is true.  I’m now on the side of the equation that participates in Executive Session, confidential matters, and some of the privileged information and meetings that I grew suspicious of in my years as a rank-and-file member.  I guess you could say that is the bad news.  The good news is that my crossover is not the end of the story.  My commitment to my Board duties regarding confidentiality of competitive matters for the good of the co-op will be equally matched with my commitment to communicate with you important things happening at PEC.  This balance may be difficult to strike, but I think it is precisely this balance that must be the focus moving forward so that you, the members, can experience true transparency and accountability from the Board and Management.

The other good news is after several weeks of orientation, meetings, questions, research, and now my first official board meeting, I can tell you that things are not as “dark” on my side as you might fear.  Sure, there are policies and directives in place that I question, and I’m working diligently to discover what the right thing to do about those things are (the co-op’s plan for renewable investment is one of those things –>READ HERE! PEC Renewable Investment Proposal).  Regardless of my concerns, however, I do believe that we have some great people working hard for PEC that have been leading the co-op in the direction of lower rates, financially-sound business practices, and streamlined operations.  I support their efforts and encourage them to continue boldly along that path.

Now is the time for you, the membership, to get involved.  Ask me questions.  Ask the other board members questions.  Ask the management questions.  Come to board meetings.  Check the co-op website for news and updates.  Check back here for my own version of PEC news.  Do what you can to stay informed and current on issues that affect us all.  I’m looking forward to hearing from many of you during these next three years.